Can intelligent fulfillment fix retail delivery?

April 28, 2018

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More than one-third of online orders were delivered late or incomplete during the last holiday shopping season, according to the recent Omnichannel Fulfillment Study, conducted by Kurt Salmon, part of Accenture Strategy.1

Conducted annually for the last five years, the study analyzes 500+ online orders at 200+ retailers in the United States, Germany and the United Kingdom, including multi-brand retailers, traditional big boxes, specialty retailers and online-only e-tailers. The study looks at shipping speed, accuracy, service level and cost for orders placed on Black Friday, Cyber Monday and the Christmas season.

This past holiday season, the study shows online retailing continues its double-digit growth in Europe and the United States:

The good news: Retailers have successfully driven up their online order volumes.

To get ahead of this, retailers need to investigate alternative options for fulfillment, and creating an omnichannel fulfillment strategy can help. Scaling delivery capabilities and capacities to keep up with sales volume is a must-have in today’s demanding consumer environment. It’s essential to competing effectively with retailers who deliver speedily, accurately and consistently, regardless of sales volume.

Many retailers promised less and still struggled

The retail delivery scenario in three key geographies—Germany, the United Kingdom and the United States—shows retailers lowered consumer expectations by advertising slower delivery times over the holidays than in years past. But slower should not mean late. Unfortunately, in the UK, 21 percent of orders were delivered late. In Germany, it was 29 percent, while in the United States, a whopping 41 percent of Cyber Monday orders missed their target delivery date.

In response to online growth and competition, retailers are investing in new facilities and automating their supply chain to improve reliability and costs. More are also offering new methods of delivery such as Click & Collect (C&C) in the hopes of easing the strain on their supply chain, while better satisfying consumer demands.

Click & Collect: Pick-up flexibility at low cost or high speed

C&C allows customers to pick up items they ordered online in a store. As retailers search for convenient, lower-cost or customer fulfillment options, C&C is becoming more popular. It’s just one of multiple options in an omnichannel fulfillment scenario, but one consumers seem to like.

United Kingdom

Nine out of 10 UK retailers offer C&C. Requiring 2.9 days lead time, C&C is typically faster than standard home delivery. In addition, it’s a lower-cost alternative to home delivery, with almost four out of five retailers incurring no additional charges. According to Ofcom in the UK, almost half of consumers have used C&C. Among those who prefer C&C over home delivery, 70 percent use it for the convenience of picking up an item at any time, while 51 percent said it was to avoid delivery charges.2

Germany

In Germany, C&C is popular, but less so—although it is growing. Today, it is offered by six out of 10 retailers, compared to four out of 10 in 2016. But, C&C is not as successful in Germany as in the UK for one main reason—most retailers ship from their central distribution centers (rather than use store stock), which adds almost a day to the process, making C&C slower than home delivery.

United States

In the US, only four out of 10 retailers offer C&C, but those who do have items ready for pick-up within 2.5 hours on average. That requires real-time transparency into store stock, as well as in-store pick-and-pack capacities and processes. Roughly half of retailers who offer C&C switch it off during peak shopping periods to ensure sufficient minimum store stock levels. During Cyber Monday, 10.5 percent of items ordered were canceled by retailers. With the right digital technology and algorithms, that scenario can be avoided.

Predictive Supply Chain Analytics can help

While some new technologies like drones seem promising, they won’t provide the scale necessary to address delivery capacity. Instead, solutions need to come from intelligent fulfillment supported by strong, predictive supply chain analytics.

Retailers need to share demand forecasts with parcel carriers earlier and more accurately, use order management solutions with predefined business rules that also consider distribution center, store and transport capacities, and introduce dynamic, reoptimizing transport routing that adapts as new orders come in and levels of traffic change.

Ultimately, consumer preferences, product characteristics and geographic context need to be analyzed granularly and in real-time to enable dynamic fulfillment decisions at the single-order level. These elements need to dovetail with a comprehensive, flexible fulfillment offer to the consumer, including Click & Collect and Return to Store programs. By following this path, retailers will enable nimble supply chain operations–a key step in developing an agile business model to adapt to the new retail industry landscape and remain competitive.

Now is the time to plan for 2018’s peak shopping days. 2017 was the first time since the inception of our study five years ago that almost a third of retailers opted not to provide a guaranteed shipping date to consumers. While that may have helped them not disappoint, it may also have driven customers to another retailer who could predict a delivery date with greater accuracy. Which retailer do you want to be?